The Future for the OEMs and Auto Recycling

Mar 1, 2023 | Business

By Marty Hollingshead

OEMs are finally starting to realize that we are not their enemy or their competition, but we are a relevant, viable partner.

First, let’s look at the OEMs; what their business model was, and what it will look like in the future. The OEMs right now are very concerned about their future and what their new business model will have. Prior to the pandemic and electric vehicles coming onto the market, they were very profitable by building internal combustion engine (ICE) vehicles. There was plenty of demand globally, and they had the capacity, as well as the components, to build vehicles and satisfy demand.

Then, the pandemic came, and with it came a host of issues such as labor shortages, manufacturing interruption, and the byproduct of this was supply-line issues. They could not deliver finished vehicles because of this.

Also, now came the introduction of electric vehicles (EVs). These vehicles were promoted as replacing ICE vehicles altogether, and many auto manufacturers, because of social, environmental, and political issues, jumped on this bandwagon.

So, the OEMs now discovered that electric vehicles do not generate a profit for them. This, and shrinking global demand, are the reasons why they are now concerned about their future, as well as their business model.

Let’s take a look at electric vehicles. Will they really replace ICE vehicles? The biggest issue with producing EVs is the battery and the rare earth materials needed to build it. These materials are in short supply, and they are controlled and come from countries that do not like us. Obviously, getting these materials currently is a challenge.

Electric vehicles have no carbon footprint. This is false. How is the electricity produced to keep these vehicles charged?

Electricity is generated by these different means:

1. Nuclear

2. Coal-fired generators

3. Hydro-electric

4. Solar

5. Wind

Our electrical infrastructure is struggling to handle current demand. Just during Christmas week here in Indiana, the electric supply company that supplies us as well as 13 other states asked consumers to turn off lights and conserve energy to prevent rolling blackouts and brownouts. With this being said, how are we going to be able to supply this increase in future demand for electrical power?

We are maxed out now, and the only solution as I see it would be to build more nuclear power plants, which nobody wants. Electric vehicles will have a place in metropolitan areas where pollution is an issue, and short travel distances are more common. I think that what we will see evolve from all of this will be the development of plug-in, hybrid vehicles, as well as fuel cell (hydrogen-powered) hybrids.

With the advances in engineering and technology we currently can make a sub-compact hybrid/ICE vehicle that can get 100 miles per gallon. With small and midsize SUVs being in the 60-70mpg range.

The OEMs are now looking at ways to meet market demands, as well as to stay relevant and profitable in the future. In the past, the strained relationship between auto recyclers and the OEMs has been adversarial at best. The good thing now is that the OEMs are finally starting to realize that we are not their enemy or their competition, but we are a relevant, viable partner. Because of this, they are now willing to work with us.

What needs to be understood here is that this is a global issue. Just like with our business, now these guys will be forced to change and evolve at a rate they have never seen before. Just like with auto recyclers, they will find a way.

While the future is unclear, one thing is for sure: As long as there are modes of transportation, there will be a need for parts to repair them, as well as automotive recyclers.

Analyze that!

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Marty Hollingshead has been in the auto recycling business since 1973 and is the owner of Northlake Auto Recyclers, Inc., Hammond, Indiana, since 1984. Marty is on the ARA Executive Committee, currently serving as Immediate Past-President. He is a board member of the Indiana Automotive Recyclers Association. Both Marty and Northlake have received numerous awards and recognition for excellence in the industry and the community. Reach Marty at 219-937-3960 or visit www.narparts.com.

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